Mapletree Commercial Trust has priced its Singapore initial public offering just above the mid-point of the indicated range, at S$0.88 per unit, which allowed it to raise S$893.2 million ($718 million). Many of the investors were price sensitive, but after the bookbuilding picked up momentum in the final two days, the bookrunners were able to push the price up a couple of notches.
The demand was Asia-heavy and, perhaps not too surprising for a yield play, private wealth money accounted for a large portion of it. However, according to sources, there was also good demand from long-only funds and hedge funds. Over all, the institutional portion of the deal was at least five times covered and drew more than 200 investors, the same sources said.
The healthy demand suggests Mapletree Commercial Trust and its bankers made the right call when they chose to delay the institutional bookbuilding for a few weeks after the investor education to allow the concerns arising from Japan’s earthquake to settle down and risk appetite to return. The Singapore stock market hit a 2011 low on March 18, one trading day before Mapletree Commercial Trust’s expected launch date, but by the time the deal did launch on April 6, the benchmark index had rebounded 7.8% and was back at pre-quake levels. In the past one-and-a-half weeks, the market has remained largely unchanged.
The deal is the second-largest IPO in Singapore this year after Hutchison Port Holdings Trust’s $5.45 billion offering last month, which also ranks as the largest listing in the world so far this year. If the 10% greenshoe is also exercised in full, the total deal size will increase to $790 million.
The buyers were attracted by the yield, which at 5.65% came at a premium to some of Mapletree Commercial Trust’s key competitors, as well as the underlying assets — particularly VivoCity, Singapore’s largest shopping mall, which is located in a rapidly growing part of the city, right at the entrance to Sentosa Island. The backing of the Mapletree group and a first right of refusal to a number of the group’s other developments in the same area as VivoCity also gave investors confidence that the trust will be able to successfully grow the portfolio.
Mapletree Commercial Trust is the fourth real estate investment trust (Reit) sponsored by the Mapletree group. It focuses on a combination of retail and office properties and has three assets in its initial portfolio with a combined value of S$2.8 billion at the end of 2010. VivoCity is by far the largest, accounting for more than 70% of the portfolio, both by income and value. It also owns two office buildings in the same area — the Bank of America Merrill Lynch Harbourfront and the PSA Building. Meanwhile, the properties covered by the first right of refusal could almost quadruple the size of the Reit to 6.9 million square feet from 1.8 million square feet at the time of listing.
The Reit offered approximately 1 billion new units, or 54.5% of its total share capital, at a price between S$0.84 and S$0.91. The final price of S$0.88 translates into a dividend yield of about 5.65% for the fiscal year to March 2012, based on the company’s own dividend estimate of 4.98 Singapore cents per unit. The average earnings forecast by the joint bookrunners puts the dividend yield at a slightly higher 5.8%. Both exceed the 5.2% that retail property-focused CapitaMall Trust is trading at and the 5.1% offered by office-focused CapitaCommercial Trust. Suntec Reit, which like Mapletree Commercial Trust comprises both retail and office space, is trading at a yield of 6%.
Of the total offering, 302 million units, or 29.7%, went to four cornerstone investors who invested a combined S$266 million. The largest of the four was Asian life insurer AIA, which bought about S$121 million worth of units and will hold 7.4% of the Reit at the time of listing.
Some 16.2% of the deal was reserved for Singapore retail investors who will be able to subscribe through a separate offering that opens tomorrow and runs until April 25.
The 45.5% of the trust that was not sold through the IPO is retained by the Mapletree group, which is an unlisted property unit of Temasek Holdings.
Mapletree Commercial Trust is brought to market by Citi, DBS, Deutsche Bank, Goldman Sachs and CIMB. It is due to start trading on April 27.
Meanwhile, bankers say Perennial China Retail Trust is in the process of restructuring its IPO with the aim of returning to the market soon. The trust, which is sponsored by Singapore entrepreneur Pua Seck Guan, called off a S$1.1 billion ($862 million) fixed-price IPO in early March, citing the volatility in global markets. According to media reports, the relaunched deal will be slightly smaller than the first attempt, at about S$840 million, and might hit the market just after Easter. DBS, Goldman Sachs, and Standard Chartered are joint bookrunners.